U.S. Mortgage Rates Drop to a Two-Month Low

U.S. mortgage rates fell to a two-month low, cutting borrowing costs for homebuyers prior to a Federal Reserve move to further scale back stimulus measures that have helped keep loans inexpensive.

The average rate for a 30-year fixed mortgage was 4.32 percent this week, down from 4.39 percent, Freddie Mac said today. The average 15-year rate dropped to 3.40 percent from 3.44 percent, the McLean, Virginia-based mortgage-finance company said.

The Federal Open Market Committee said yesterday it will trim its monthly bond buying by $10 billion to $65 billion. The purchases have kept borrowing costs at historic lows, bolstering the housing recovery. Home prices in 20 U.S. cities rose in November from a year earlier by the most since 2006, according to the S&P/Case-Shiller index released this week.

“To the extent that tapering is going to remain modest in an improving economic environment, we should expect any increase in mortgage rates to be modest,” said Millan Mulraine, deputy head of U.S. research and strategy for TD Securities in New York. “What’s important for the housing market is what happens in the labor market, and there we’ve seen signs of improvement.”

U.S. employers added 74,000 workers last month after a revised 241,000 gain in November that was larger than initially estimated, the Labor Department reported on Jan. 10. The unemployment rate dropped to 6.7 percent, a five-year low.

Contracts (USPHTMOM) to buy previously owned houses fell 8.7 percent in December from the previous month as abnormally cold weather in much of the U.S. deterred shoppers, the National Association of Realtors said today.

While new-home sales decreased 7 percent in December from the previous month, demand for all of 2013 jumped 16.4 percent, the Commerce Department reported earlier this week.

To contact the reporter on this story: Prashant Gopal in Boston at pgopal2@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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